How Does Mining for Bitcoin Work?

Bitcoin is essentially created from the so-called Bitcoin mining process. This is not a physical mining process, but rather an intricate network of virtual problem solving that aids in and validates the transaction records of the Bitcoin system.

Bitcoin miners are in no way employed by Bitcoin, miners are just individuals that have the necessary equipment and skills to mine Bitcoin and are taking advantage of the possible profits to be made by mining. Bitcoin miners use specialised, and often quite expensive, computer equipment to help them solve complex mathematical algorithms and can earn Bitcoin in return for solving these puzzles. The mathematical problems that the miners work on solving are formulated by the many Bitcoin transactions happening at any given moment. A group of a few hundred Bitcoin transactions is called a ‘block ’. These blocks are grouped and collected by mining computers every ten minutes or so and once a miner has successfully solved a block they have validated these transactions.

Bitcoin miners work in networks and the teams check each others’ solutions to ensure that the sender of the Bitcoin does indeed have the necessary funds and is not spending the same funds more than once. When enough miners have checked the puzzle and granted their approval, a block is added to the ledger. The incentive of helping validate and check other miners solutions is that a miner that solves a puzzle only receives their award of 25Bitcoin once an additional 99 validated blocks have been added to the transaction ledger. Bitcoin also users have the option to donate Bitcoin to the miners to expedite their transaction time, which is usually roughly 10 minutes, although there are no obligatory transaction fees.

Paying the miners in Bitcoin increases the Bitcoin economy and the system of working in networks and using others validations makes the system pretty secure as hackers would need to work against a huge network of miners and rewrite blockchain at an extremely fast rate. That being said, the system is not completely foolproof and there is always the possibility of digital bank robbers, as there are with many other systems.

The startup costs of becoming a Bitcoin miner are quite high and it usually takes a while to learn how the system works but there are definite profits to be made in this new and upcoming industry.